Goldman cuts US recession risk following retail sales, jobs data

GOLDMAN Sachs Group economists lowered the probability of a US recession in the next year to 20 per cent from 25 per cent, citing last week’s retail sales and jobless claims data.

If the August jobs report, set for release on Sep 6, “looks reasonably good, we would probably cut our recession probability back to 15 per cent, where it stood for almost a year” before a revision on Aug 2, the Goldman economists led by Jan Hatzius said in a report to clients on Saturday (Aug 17).

A flurry of data showing US economic resilience drove stocks to their best week this year, with dip buyers stepping in after a recent rout. The value of retail sales increased in July by the most since early 2023. Separate government figures showed the fewest applications for unemployment benefits, in the week ending Aug 10, since early July.

Goldman economists also said they have become “more confident” the Federal Reserve will cut interest rates by 25 basis points (bps) at their September policy meeting, “although another downside jobs surprise on Sep 6 could still trigger a 50 bp move”.